Question

Peter invests $1000 at 4% compounded annually for 10 years and Jose invests $900 compounded annually at 5% for 11 years. Who ends up with more money? And how much more money?

Answer 1

Jose ends up with more money with $59 more than Peter.

Explanation:

To determine the amount they will have, you have to use the formula to calculate the future value:

FV=PV(1+r)^n

FV= future value

PV= present value

r= rate of interest

n= number of periods of time

-Peter:

FV=1,000*(1+0.04)^10

FV=1,000*1.48

FV=1,480

-Jose:

FV=900*(1+0.05)^11

FV=900*1.71

FV=1,539

Difference: $1,539-$1,480=$59

According to this, the answer is that Jose ends up with more money with $59 more than Peter.